The Global Competitiveness Index and other ways to measure progress

By Katy Wilson

The Global Competitiveness Index (GCI), developed by the World Economic Forum, measures and ranks economies in terms of their competitiveness, defined as “the set of institutions, policies and factors that determine the level of productivity of a country”. The details of this ranking and descriptions of the competitiveness landscape of individual economies are detailed in The Global Competitiveness Report, an annual publication designed to provide a “platform for dialogue between government, business and civil society about the actions required to improve economic prosperity”. This year the report covers 144 countries, which together represent 98.3% of world GDP. The GCI, in calculating competitiveness, combines 114 indicators under 12 pillars (shown in Figure 1 below). For more details on the methodology for compiling the GCI go here.

In the 2014-2015 report, the 35^th edition, innovation and skills are highlighted as being particularly important in influencing competitiveness, key attributes needed in the aftermath of global economic crisis. Alongside a recovering and unsettled economy, conflict and growing wealth inequality pose significant barriers to sustainable and inclusive growth, themes the report prioritizes. Political will and cooperation are of utmost importance in seeking a more resilient and fair global economy.

Sub-Saharan Africa is a region performing the worst in terms of global competitiveness. The top ten most competitive economies in SSA are:

Of these only the top three occur in the first half of the league table and African countries fill 15 of the lowest 20 spots. Areas in need of improvement include health, education and infrastructure. A significant threat highlighted is the growing youth population – “by 2035, more people will be reaching working age in sub-Saharan Africa than in the rest of the world put together”.

The GCI has come under criticism for being opaque in its definition of competitiveness. On the one hand conflating it with productivity and prosperity while on the other having a high competitiveness score does not necessarily mean the country and its citizens are more prosperous than others. Instead the indicators are seen as being representative of WEF’s neoliberal politics. The WEF did, however, recently release The Inclusive Growth and Development Report, which engages with discussions to improve or develop new models of economic growth and development to expand social participation and benefit sharing. The report, which covers 112 economies, seeks to improve our understanding of how countries can use a diverse spectrum of policy incentives and institutional mechanisms to make economic growth more socially inclusive without dampening incentives to work, save and invest.

Regional free trade agreements: secrecy, safety and sovereignty

New global trade deals are currently being negotiated, in part arising from the failings of the World Trade Organisation’s Doha Round. Proposals include the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP). There are, however, many questions on what these agreements will include and what they will mean for those excluded, particularly poorer, developing countries.

Transatlantic Trade and Investment Partnership

The Transatlantic Trade and Investment Partnership (TTIP) is a proposed free trade agreement between the European Union and the United States that could be finalised by the end of 2014. On the one hand such an agreement could boost multilateral economic growth while on the other it could increase corporate power perhaps at the expense of public benefit.

Although the EU released a document in July entitled, State of Play of TTIP negotiations ahead of the 6^th round of the negotiations, the content of negotiations has been criticised as being opaque and shrouded in secrecy. Governments involved have stated they will not publish draft text. A recent factsheet released by the Office of the US Trade Representative, laid out the US’s objectives with regard to the TTIP, largely revolving around increasing market access, mainstreaming regulations and standards and removing non-tariff trade barriers, for example:

“We seek to eliminate all tariffs and other duties and charges on trade in agricultural, industrial and consumer products between the United States and the EU, with substantial duty elimination on entry into force of the agreement, transition periods where necessary for sensitive products, and appropriate safeguard mechanisms to be applied if and where necessary.”

“We seek to ensure that U.S. investors receive treatment as favorable as that accorded to EU investors or other foreign investors in the EU, and seek to reduce or eliminate artificial or trade-distorting barriers to the establishment and operation of U.S. investment in the EU.”

The TTIP will have impacts across a range of sectors such as energy, agriculture and environment, as well as different rights relating to, for example intellectual property and labour. John Hilary, Executive Director of War on Want, explains what the TTIP is and why it is potentially damaging in this booklet. On the issue of food safety, in aiming to create a framework that allows freer trade, both the US and EU may have to reduce current restrictions. In the EU’s case this may be in relaxing standards on genetically modified organisms, on banned veterinary growth hormones or on other meat and poultry products. For the US, this may mean removing limits on European imported beef in response to Mad Cow Disease. Reluctances to lower food standards, in particular on hormone beef and GM, could in fact threaten the TTIP but if not, many fear countries and its citizens will lose control over what can be grown, how food is produced and how safe it is. Other areas of contention could include the EU’s desire to protect Geographical Indications, foods such as Parma ham or Roquefort cheese, to prevent usage by other producers and differing approaches to agri-environment schemes.

The Institute for Agriculture and Trade Policy also released a report documenting the “Promises and Perils of the TTIP”. Controversial criticisms of the TTIP include the threat it poses to the UK’s National Health Service and the so-called investor-state dispute settlement, which could allow corporations to sue governments outside of domestic courts. Such a mechanism in other trade agreements has allowed, for example, mining companies to sue governments trying to keep them out of protected areas and banks to fight against national financial regulations, as George Monbiot explains in The Guardian.

As more details of the TTIP are coming to light, many of the benefits of such a partnership are being questioned while the risks are seemingly very real. In particular the secrecy of negotiations and large role played by corporations in these negotiations is of concern. The potential risks most talked about are in the EU and US themselves with little said about the broader impacts. The German aid organisation Brot für die Welt, however, warns against an EU-US free trade agreement saying it “will undermine local support for smallholders in developing countries and exacerbate the global food crisis” while others believe the TTIP will do little for environmental sustainability and other global challenges.

Trans-Pacific Partnership

The Trans-Pacific Partnership (TPP) is also a free trade agreement currently being negotiated and will cover twelve countries in the Asia-Pacific region: Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Negotiations for what could be the largest regional free trade agreement in history have been ongoing since 2005, and although expected to be concluded in 2012, disagreement around issues such as agriculture, intellectual property, and services and investments have delayed the process.

Africa: a continent of resilience and opportunity

Africa is often referred to as a continent of opportunity, economic or otherwise. In part because of the progress made – since 2000, rates of extreme poverty and hunger have dropped as have the number of new HIV infections, and access to education and health care is increasing. But also due to the predicted changes to take place over the next few decades – 6 of the 10 fastest-growing economies are in Africa, and a growing youth population means that the continent will have a working-age population bigger than that of China or India by 2035.

Indeed the theme of the first ever US-Africa Leaders Summit which recently drew to a close, was “Investing in the Next Generation.”. 40 or so heads of states and government from across Africa joined President Obama in Washington to discuss the opportunities for developing sustainable African economies. A key message from the summit is that to achieve future growth, economies must tackle the drivers and impacts of climate change, and John Kerry remarked at a Working Session on Resilience and Food Security in a Changing Climate that in order to “ensure that farmers, fishermen, and the billions who depend on the food that they produce are able to endure the climate impacts that are already being felt, let alone yet to come” is to focus our efforts “on the intersection of climate and food security, by adopting creative solutions that increase food production and build resilience to climate change”.

Some political progress on supporting climate change adaptation is happening. The African Union agreed in the 2014 Malabo Declaration to increase agricultural growth to cut poverty and hunger in half by 2025, to double agricultural productivity, halve post-harvest losses and reduce stunting to 10% across the continent as well as to reduce vulnerability to climate and weather risk, and mainstream resilience.

The Global Alliance for Climate Smart Agriculture, planned to launch at the UN Secretary General’s Climate Summit on September 23, is an international alliance, aiming to drive momentum and interest on climate smart agriculture (CSA) and to become a platform to coordinate the adoption of CSA. The USAID and the Rockefeller Foundation have also recently announced a $100 million Global Resilience Partnership to “accelerate promising technologies and ideas and identify new opportunities that can better build the resilience of families, communities, countries and regions”, for example, improving drought cycle management and expanding climate-resilient agricultural practices.

Also recently launched in Nairobi, a UNEP report, Keeping Track of Adaptation Actions in Africa, presents practical examples of successful low-cost adaptation solutions from around sub-Saharan Africa. The report details several examples of adaptation projects that have helped people cope with the impacts of climate change and have also stimulated local economies and incentivised government investment and policy change. The report is in part responding to the 2013 Africa Adaptation Gap Report which recognised the potentially staggering costs of climate change for Africa.

What we’ve been reading this week

This week’s summary on the news stories, reports and blogs that have grabbed our attention. We welcome your thoughts and comments on these articles.

How economic growth has become anti-life, The Guardian

Group claims GMOs failed to deliver promised benefits, Inquirer News

Orange Sweet Potato One of the Most Innovative Ways to Feed the Planet, Says USAID Administrator, HarvestPlus

A YOUng FARMer’s vision, PAEPARD

UK agricultural research aid should do more for poor farmers, says watchdog, The Guardian

Yields of new varieties of agricultural crops continue to increase, Wageningen University

The Idealist: a brilliant, gripping, disturbing portrait of Jeffrey Sachs, From Power to Poverty, Duncan Green

Three Billion Poor People Are Waiting for Business to Reinvent Itself, The Business Solution to Poverty

Science has bigger say in GM food, China Daily

How African innovation can take on the world, PC Tech Magazine

Have a Coke and a … GMO?, Politico

Landscapes debate could reinvigorate UN climate talks in Warsaw – negotiator, CIFOR, Thomson Reuters Foundation

Traditional innovation in farming is under threat, IIED

End Of The Egg? ‘Fake Egg’ Company Aims To Replace 79 Billion Chicken Eggs Laid Each Year, Civil Eats

How to end world hunger, CNN

 

Consuming planet Earth

Since we first saw images of planet Earth from space in 1968, GDP per capita has almost doubled and mean life expectancy has risen from 56 to 69.6 years. These increases in income and health have been coupled with the depletion of natural capital, increased greenhouse gas emissions and increasing hunger and poverty.

As the book, The Limits to Growth, warned in 1972, the earth’s natural capital is limited and at some point we will reach these limits. Rising prices of goods and services as well as break downs in ecosystem services will indicate this threshold has been breached.  And we have passed this checkpoint. Global metrics that measure human impact on earth’s natural resources such as the Human Development Index, Genuine Progress Indicator, Ecological Footprints, and the Happy Planet Index, all indicate that the earth has exceeded its ability to provide resources to meet human demands and that further human consumption is impacting the earth’s ability to provide such services.

A recent paper authored by Jules Pretty of the University of Essex states that “overshoot has already begun to occur, in which more resources are being used than can be regenerated each year. Yet conventional economic growth is still a primary political goal in most countries.” A Royal Society report of 2012 made clear that unrestrained growth will at some point end as the finite limits of our natural resources are reached.

The paper, entitled The Consumption of a Finite Planet: Well-Being, Convergence, Divergence and the Nascent Green Economy, analyses the relationship between such consumption indicators as GDP, CO₂ emissions and meat consumption with well-being across 189 countries and, for three affluent countries, across a time span of 60 years.

What we’ve been reading this week

This week’s summary on the news stories, reports and blogs that have grabbed our attention. We welcome your thoughts and comments on these articles.

Improving child nutrition. The achievable imperative for global progress, UNICEF

The World Needs Genetically Modified Foods, The Wall Street Journal

Grassroot-level innovations may hold the key to global challenges, The Guardian

World food prices rise 1 pct in March – FAO

Primary commodity prices and global food security. Why farmers still struggle when food prices rise, Thomas Lines, Green House

Millions face starvation as world warms, say scientists, The Guardian

Half a million Kenyans and Ethiopians face conflict, hunger due to dam – AlertNet

Biofuels: ‘Irrational’ and ‘worse than fossil fuels’, BBC News

World Bank: Africa’s economic growth to outpace average, BBC News

Natural resources – boon or curse?

Additional (updated) content from One Billion Hungry: Can we feed the world?

In recent years, it has become fashionable to argue that the less developed countries of Sub-Saharan Africa should emulate Brazil and the eastern tigers with rapid industrialization, in many cases on the back of the exploitation of rich mineral, oil and other resources. Around one third of the growth in GDP in Africa between 2000 and 2008 (4.9%) has come from these resources and the associated government spending they generated. The rest has come from internal structural changes (e.g. Nigeria privatized more than 116 enterprises between 1999 and 2006) and from other sectors. Africa is projected to continue to profit from the rising global demand for natural resources given that it comprises 10% of the world’s oil reserves, 40% of its gold and 80 to 90% of the chromium and platinum metal group. But so far, the experience has not been accompanied by much trickle down and indeed has reversed progress towards reduction in poverty and social freedoms. Moreover, countries both with and without significant resource exports have had similar GDP growth rates between 2000 and 2008.

Although in  the short term the export of natural resources such as oil and minerals can give an economy a boost, generating higher incomes, allow greater consumption of both imported and domestically produced goods, and provide governments with greater resources for investment in development, the long-term impacts may offset, if not exceed, these positives. In 1977 the Economist published an article entitled The Dutch Disease that described the situation whereby a country’s export performance is reduced as a result of an appreciation of the exchange rate after a natural resource such as oil has been discovered.

The transition of an economy to the production of natural resources, despite mixed evidence of the nature (i.e. positive or negative) of its impact on economic growth, has been deemed the ‘resource curse’.

The transfer of capital and labour to the natural resource sector can lead to declines in productivity in other sectors, such as agriculture, that will be important sources of growth when the natural resource is depleted. Further impacts can include volatility in public spending associated with volatile prices and thus revenue from natural resources, as well as over borrowing, when commodity prices are high, leading to high debt levels, when commodity prices fall.

New Oxfam Discussion Paper: Private Investment in Agriculture

An Oxfam Discussion Paper, authored by Erinch Sahan and Monique Mikhail, released in 2012, lays out the need for huge investment in agriculture in developing countries. Both public and private sector investment is needed but investments must promote production in a manner that ‘does no harm’ and that ‘does more good’.

The key roles for the public sector should be to support the most vulnerable small-scale food producers, those who the private sector has little incentive to engage with, and to create the right policy environment to allow the private sector to invest. But, as the paper points out, agriculture is ‘inherently a private sector endeavour’ and thus requires private investment, both large and small.

While the paper notes that private sector investment could have a positive impact it caveats this with the warning that investments must follow ethical and sustainable business practices. From Oxfam’s work on mobilising the private sector to support smallholder farmers, certain principles have emerged which they document in this paper. The private sector should invest in staple crops, local and regional markets, processing, access to services, sustainable agriculture as well as work with producer organisations and focus on women’s empowerment. Oxfam believe that private and public sector investment should complement each another and that when private sector investment is coupled with the right enabling environment, this investment can be transformational to economic growth, environmental sustainability and poverty reduction.